Commodity bust, life style metal boom?
By Rosemary Johnston
February 14, 2017
The bottom of the economic cycle for commodity prices in Australia has been experienced according to various Government announcements. Queensland and WA bore the brunt of the downturn.
In December iron ore and coal exports were higher than expected. The Office of the Chief Economist at the Department of Industry and Science suggests why.
They report that the Chinese Government’s housing policy is impacting iron ore and coking coal sales. That Government has restricted the number of properties each person can own. This has dampened demand for the investment properties in high rise apartment buildings in the cities. These apartments need steel for support over multiple storeys.
This policy has also driven international property investment. Several Australian States have introduced additional stamp duty costs for foreign national purchases. This has not done much to dampen enthusiasm for Sydney or Melbourne properties.
Understanding the gigantic influence of China on global property markets is challenging as we can’t read the news reports in China. Check out www.juwei.com and sign up for their newsletters. They report on insights that they are observing. This marketing machine educates the 99% of Chinese nationals who can’t speak English and the 99% of Westerners who can’t speak Mandarin or Cantonese. My observation is that their referencing of sources is very transparent for Australian policy.
If we step back further for a bigger picture: international forecasts suggest that 70 million people per year are joining the middle class, that is nearly three times the population of Australia. Urbanisation forecasts for China estimate that 170 million people will move to the cities over the next decade. On top of this we have huge urban inflows of people into the cities of Indonesia (Population 255M), Nigeria (Population 190M) and the Philippines (Population 102M).
What do new urban residents and newly middle class people seek? Life style! The next wave of metals to watch are the so called life style metals. Zinc, nickel and copper are used to make fridges, washing machines and air conditioners, plus the cobalt and lithium used for smart technology from phones and computers to smart cars, buildings and cities. Stainless steel alone requires the following elements; coking coal, nickel, cobalt, manganese, chromium, molybdenum, titanium, copper, zinc and other base metals to varying degrees.
“There’s no question we’re in the lull between the conversion of the steel to the lifestyle metals,” said partner and head of Australian mining for industry consultants PwC, Chris Dodd. Check out the media on this and also the Office of the Chief Economist quarterly report called “Energy and Resources Quarterly”. This interesting report covers world economic cycles that influence commodity usage and some of these life style metals. You can subscribe to their publications at the first reference below and consume them at the second reference. These documents are also in the PIAA Knowledge Resources folder for our members.
https://industry.gov.au/Office-of-the-Chief-Economist/Pages/default.asp
http://www.abc.net.au/news/2016-01-19/future-minerals-need-traditional-commodities-still/7091418